First Thing Today | July 26, 2021

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Good morning!

Early week pressure… Corn futures are down 3 cents to start the week, with soybean futures 8 to 10 cents lower. Winter wheat futures are 8 to 11 cents lower, while spring wheat is down 7 to 10 cents. The U.S. dollar index and crude oil futures are slightly lower. Unease is growing among traders regarding the Covid-19 virus, with Dr. Anthony Fauci saying the situation is “moving in the wrong direction.”

Hot, dry week likely for much of the Midwest and Plains… Midwest corn and soybean producing areas are likely to be quite warm with limited rainfall this week, resulting in net drying across much of the region. The best rains are expected in the Great Lakes region, reports World Weather Inc. It details temperatures are expected to be in the 90s to 100s for the northern and central Plains early this week, and in the Central Plains and western Corn Belt midweek. “Nighttime low temperatures will be in the 70s during the early to middle part of this week, but they should cool down to the 60s and lower 70s during the late week and weekend,” World Weather reports. Some rains could fall across 40% of the western Corn Belt at week’s end, with more rain possible early to midway through next week, the weather watcher adds. Showers are also possible for the eastern Belt over the weekend and next week.

Low Parana River water levels likely to get worse before they get better… Water levels along the Parana River are so low that ships moving along this key shipping hub are having to reduce cargoes by 25%. River levels are at a 77-year low due to drought, and the region is expected to remain dry for months. Concerns are mounting about the Parana’s ability to handle wheat exports later this year. “If the situation does not reverse, and nothing suggests that it will, we will be losing 40% of what ships usually carry when water levels are normal,” Guillermo Wade, manager of Argentina's Chamber of Port and Maritime Activities (CAPyM), told Reuters in an interview.

Major flooding hits some key producing areas of China’s Yellow River Basin… Excessive rains fell from western Hebei and far eastern and southern Shanxi southward through northeastern Hubei, all of Henan, much of Anhui and northern Jiangxi in central China last week. World Weather Inc. estimated the area impacted by the worst conditions encompassed around 91,000 square miles—near the equivalent of Illinois and Indiana combined. The area impacted are major producers of groundnuts (peanuts), corn and soybeans. Concerns are also mounting about lost livestock and the spread of disease given washed out manure pits and the country’s ongoing struggle to contain African swine fever.  

Research bureau: Kazakh wheat stocks should remain abundant, despite crop woes… Drought has diminished Kazakhstan’s 2021 wheat crop prospects, but the country’s grain supplies should not be problematic thanks to high stocks of the grain and the country’s imports of grain from Russia, analysts with the country’s grain and oilseeds research bureau said. The bureau lowered its wheat crop forecast from 10.0 MMT to 9.5 MMT, but it also called for the country’s wheat stocks to end the marketing year at an eight-year high of 1.3 MMT. Last week, the country’s grain union lowered its wheat crop estimate from a range of 13.0 to 13.5 MMT to 11.9 MMT. Kazakhstan announced last week it would ban exports of rye and limit exports of barley and wheat for six months beginning Aug. 15.

Russian wheat export prices on the rise… Mounting global concerns about some weather issues in key exporting countries pushed Russian wheat export prices higher last week, with IKAR ag consultancy estimating prices climbed $7 over the past week to $248 MT free on board and the consultancy SovEcon pegging the price rise at $6 to $245 per MT. Domestic prices also climbed, thanks in part to the lower weekly export tax and some concerns about dryness impacting its spring wheat crop.

The week ahead… What makes Congress work and even get some things done? The approach of a long vacation. That’s why both chambers will likely act on topics that have lingered for months/years. The big-ticket Senate issue is the $1.2-trillion physical infrastructure measure. Text is still awaited so it’s murky as to what day this week votes will be held. But unless there is another snag in the pay-fors, there will be at least 11 Republican votes to go along with Democratic approval to get the matter pushed to the House. That chamber is already signaling issues with the topic, especially among the far-left members. The meatpacking industry will be the focus of several hearings on Wednesday. The House could pass a chunk of its FY 2022 spending bills, including measures on funding for USDA and EPA. Coming economic reports include updates on home sales, durable goods orders and second quarter GDP. The two-day meeting of the Federal Reserve’s policy-making committee wraps up on July 28. Fed Chairman Jerome Powell will hold a press conference following the release of a policy statement.

WHIP+ bill covering 2020 and 2021 ag disasters on tap for House ag panel vote this week… Of note will be how the program changes to make it more flexible and less complex. Another key: How much funding and whether or not the language will say “such sums as necessary.” The effort is a bipartisan push.

U.S. economy could be back to its pre-Covid size… Economists surveyed by the Wall Street Journal estimate that figures to be released on Thursday will show that GDP rose at an 8.5% seasonally adjusted annual rate in the second quarter. This would leave it above the $19.2 trillion level reached in late 2019, the last full quarter before Covid-19 began hammering the economy.

Vilsack predicts moderation in food inflation… USDA Secretary Tom Vilsack predicted the jump in U.S. food prices in June will quickly moderate despite rising concern about inflationary risks in the economy. “There are certain selective items in the grocery store folks may see for a period of time increased costs,” Vilsack said Friday in an interview on Bloomberg Television’s Balance of Power with David Westin. “We think this will even out as we begin to recover, as we begin to get the supply and demand in better balance.” Vilsack also signaled USDA would soon announce proposed regulations to provide more protection to livestock producers in their dealings with the highly consolidated meatpacking industry.

Fauci: Restarting mask mandates is 'under active consideration'… Fauci on Sunday said that bringing back nationwide mask mandates is "under active consideration" amid a spike in delta variant cases in the United States. During a segment on CNN's State of the Union, host Jake Tapper pressed the health authority on whether masks should be brought back for vaccinated people. "You know, Jake, this is under active consideration," Fauci said. "If you're asking, am I part of the discussion? Yes, I am." While the CDC has confirmed that those who are vaccinated are sufficiently protected against the variant as well as the U.K. variant of the virus, Fauci told Tapper that booster shots to supplement the vaccine may be necessary to sustain immunity.

China tells U.S. what it must do to repair relations… Chinese foreign vice-minister Xie Feng told U.S. deputy secretary of state Wendy Sherman that U.S./China relations had reached a “stalemate” and faced “serious consequences,” according to a Chinese foreign ministry statement. “The foundational reason is that some people in the U.S. are treating China as an “imagined enemy,” it quoted Xie as saying. After the meeting, Xie said China gave two lists to the U.S. — one with one remedial action for Washington to take towards China, and the other a series of Beijing’s key concerns. Items on the remedial list include lifting the visa restrictions on Communist Party members, their families and Chinese students; lifting the sanctions imposed on Chinese leaders, government officials and agencies; removing restrictions on Confucius Institutes and Chinese companies; cancelling rulings determining Chinese media as foreign agents; and dropping its request to extradite Huawei financial chief Meng Wanzhou from Canada. Items on the list of concerns include addressing unfair treatment of Chinese citizens in the U.S., harassment of the Chinese embassy and its consulates, the rise of anti-Asian and anti-Chinese sentiment, and violence against Chinese citizens.

Friendly cattle reports Friday could lend futures support to start the week… USDA reports there were 11.29 million head of cattle in large feedlots as of July 1, which was just under expectations. But Placements came in 3 full percentage points lower than expected at 92.9% of year-ago levels, with Marketings a bit higher than expected at 102.7% of year-ago. The data was mildly supportive relative to expectations and confirmed ongoing herd contraction. Paired with supportive results from the Cattle Inventory report, the friendly report data could provide underlying support to cattle futures to start the week. Higher boxed beef values the latter half of last week was also encouraging. Choice and Select values edged 49 cents and 17 cents higher, respectively, on Friday.

Hog futures still working to narrow discount to cash index… Market technical improved for the lean hog market last week, with traders working to narrow nearby contract’s discount to the CME lean hog index. The pork cutout value edged 3 cents higher and movement slowed to 267.03 loads. Cash hog bids fell 72 cents Friday, with national average bids down roughly $3 for the week.

Weekend demand news… There is no business to report.

Today’s reports

 

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